Eaton Frequently Asked Questions

Transcription

1 Eaton 2018 Medical Plan Options Frequently Asked Questions Table of Contents Eaton Medical Plan... 2 Medical Plan Options... 2 ID Cards... 2 Mechanics of Both Medical Plan Options... 3 Key Plan Features... 3 Negotiated Rate... 4 Preventive Care... 4 Pre-existing Conditions... 5 Out-of-Network Benefits... 5 Health Savings Account and the Eaton Medical Plan Options... 6 Definitions... 6 Eligibility... 6 Who Is Eligible to Contribute to the HSA... 6 Who Is Eligible to Have Their Expenses Reimbursed From the HSA... 8 Eligible HSA Expenses... 8 Change in Status and the HSA HSA Contributions General HSA Contribution Questions Eaton HSA Contributions Your HSA Contributions Over Age 55 or Secondary Coverage Impact on Contributions Change in Coverage Impact on Contributions Rollovers and Excess Contributions Implications of Not Being Eligible to Make HSA Contributions for the Entire Year Investing Your HSA Dollars Using my HSA (Withdrawals) Medicare Benefits and the HSA Military Benefits and the HSA HSA Administrator HSA Tools Your HSA and Taxes Your HSA What Happens In the Event You Leave, Retire or Die Prescription Drug Benefit Prescription Drug Benefit Under the Eaton Medical Plan Options Certain Preventive Drugs Covered at 100% Mail Order Program and Coupons General Prescription Drug Questions HSA vs. DVRA What s the Difference? How to Pay for Medical and Prescription Drug Expenses Page 1

2 Eaton Medical Plan Medical Plan Options 1. What are my medical plan options? Enhanced Medical Basic Medical Both medical plan options: Cover preventive care services at 100% with no deductible. Pay benefits for the same types of care from doctor office visits, to tests and hospital stays. Protect you from large medical expenses by limiting the total amount you will pay out of your pocket each year. Give you access to the same network of Anthem Blue Cross Blue Shield doctors and hospitals as well as the same discounts for seeking care in-network. Provide Express Scripts prescription drug coverage. The medical plan options are designed to reward you for being healthy and using health care services wisely: The annual deductible (the amount you pay before the plan starts to share expenses with you applies to all services both medical and pharmacy. As a reminder, preventive benefits are not subject to the deductible. If you cover dependents, the employee + others deductible must be met first before the plan begins to pay for its share of the cost, regardless of an individual s health care expenses. The annual out-of-pocket maximum applies to all in-network services both medical and pharmacy. Once you meet the out-of-pocket maximum, there is no additional out of pocket expense for in-network eligible services. You have the opportunity to open a Health Savings Account (HSA) and contribute tax-free dollars to pay for eligible health care expenses. ID Cards 2. Will I receive a medical and prescription drug ID card? The Eaton Medical Plan options have one card that you can use for both medical and pharmacy claims. You will receive a new ID card if you change from no medical coverage to one of the Eaton Medical Plan options, or you change from one of the Eaton Medical Plan options to the other Page 2

3 Mechanics of Both Medical Plan Options Key Plan Features 3. Are the medical plan contributions competitive? Yes. Eaton s medical plan contribution rates are lower on average than competitors and other large Fortune 500 companies. 4. How does the prescription drug benefit work under each plan option? Under both options, you are responsible for 100% of the cost until you reach the annual deductible. Once that is met, you and Eaton begin to share in the cost (80/20) until you meet the annual out-of-pocket maximum. To protect you from high prescription drug costs, no one will pay more than $500 per prescription after the plan deductible has been met (some exceptions apply for penalties). Once you meet the out-of-pocket maximum, Eaton will pay 100% of all eligible medical and prescription drugs for the remainder of the year. Your medical and prescription drug expenses apply to the same annual deductible and out-of-pocket maximum. Once you hit the out-of-pocket maximum, all your eligible medical and prescription drug costs are covered at 100% for the remainder of the year. In addition, if you use generic preventive drugs to treat common conditions like cholesterol or high blood pressure, these drugs are covered at 100% before the deductible. There is no cost to you. 5. I am electing employee + others coverage. How does the annual deductible and annual out of pocket maximum work under each plan option? Deductible: Both options use an aggregate deductible. This means that claims for all family members must first reach the employee + others deductible before the plan will begin to pay benefits for any member of the family. Out of pocket maximum: Both options use an individual out of pocket maximum (OOP max) for in-network services. If an individual family member has high medical expenses in a year and reaches the individual out of pocket maximum, the plan will begin paying 100% of the covered expenses for that individual. The combined medical expenses of the remaining family members contribute toward the remaining employee + others deductible. Enhanced Medical Basic Medical Enhanced Medical Basic Medical In-Network Deductible In-Network Deductible In-Network Out of Pocket Maximum Employee only - $1,700 Employee only - $2,700 Employee only - $4,000 EE + others - $3,400 EE + others - $5,400 EE + others - $8,000 per family with $7,150 max per individual In-Network Out of Pocket Maximum Employee only - $5,000 EE + others - $10,000 per family with $7,150 max per individual Page 3

4 Entire family needs to meet the employee + others deductible before the plan begins to pay its share of the cost. One individual in the family can meet the individual max, and the plan begins to pay 100% for that individual; or multiple members can meet the family max and then the plan begins to pay 100% for the whole family. Negotiated Rate 6. Is my share of the cost what I pay toward the annual deductible and coinsurance based on the actual cost or the negotiated rate? As long as you seek care from an in-network provider, your share of the cost will be based on the discounted rates Anthem BCBS negotiates with their providers. For care you receive from an out-of-network provider, only the maximum allowed amount applies to the annual deductible and coinsurance. You are responsible for the amounts above the maximum allowed amount. Assuming these out-of-network expenses are eligible health care expenses, the unreimbursed amounts are eligible for reimbursement from your HSA. As a result, going to an in-network provider will save you money. 7. What is a negotiated network discount? Doctors and hospitals participating in the Anthem BCBS network have agreed to accept a negotiated or discounted amount as payment for each covered service. When you choose in-network care, your share of the cost is applied to this lower charge. As a result, you should have lower out-of-pocket costs than if you received care from an outof-network provider. 8. How can I find out what the Anthem BCBS discount is for my area? Before you receive a medical service, contact Anthem BCBS directly to understand what the discount is for a specific medical service in your area. As a reminder, the price of a discounted medical service may vary based on where you receive the treatment (e.g., MRI at a hospital versus MRI at a free-standing facility). Be sure to shop around using the Castlight Health tool to make sure you are getting the best price for that service. Find a link to this tool on EatonBenefits.com on the left side of the page. Preventive Care 9. What are considered preventive care services that will be covered at 100% by the plan options? Both medical plan options cover in-network preventive care services at 100% for things like annual wellness exams and age- or gender-related screenings. For a complete list of covered preventive care services, see the document entitled Preventive Benefits Your Free Medical Services & Prescription Drugs in the Health Benefits the Details link under Eaton Learn More Links on EatonBenefits.com. Page 4

5 Be sure to print out a copy and take it with you to your next wellness exam so you can share this list of services with your doctor. When you go to the doctor for preventive care services, make sure your doctor uses a preventive billing code, which is commonly referred to as a V code. This will ensure these preventive care services are covered at 100%. Pre-existing Conditions 10. How are pre-existing conditions handled? Eaton does not exclude pre-existing conditions for any of its medical plan options. Out-of-Network Benefits 11. Are there out-of-network benefits available under both plan options? And, how does care received out-of-network get applied to the deductible and out-of-pocket maximum? Yes, both medical plan options provide coverage for care that you receive from an out-ofnetwork provider. There are separate in-network and out-of-network deductibles and out-of-pocket maximums. That means that any services you receive from a network provider are applied to the in-network limits and services you receive from an out-of-network provider are applied to the out-of-network limits. There are not combined in- and out-of-network plan limits. If possible, save yourself money and reach the annual deductible quicker by receiving all of your care via a network provider. Change in Status and Coverage 12. If I experience a mid-year status change due to having a baby, can I change my medical plan option? Yes, in certain circumstances you can change your medical plan option, such as having a baby. However, not all qualified status changes allow you to do so. For further information, check with the service center representatives at the Eaton Service Center at Fidelity. 13. If I experience a mid-year status change, will the amounts that applied to my deductibles and out-of-pocket maximums apply under my new coverage tier? Yes. For example, if you elect employee-only coverage effective January 1, and then get married on July 1, and move from employee-only to employee + others coverage, Page 5

6 any claims that were incurred between January 1 and July 1 would accumulate towards your family deductible and out-of-pocket maximum. 14. I am divorced and under the divorce decree I am required to provide medical coverage for my ex-wife. I also have a domestic partner now. Can I cover both the ex-wife and my domestic partner under an Eaton plan? Eaton s plan only allows coverage for a spouse or domestic partner. It does not recognize the court decree to cover a divorcee. Health Savings Account and the Eaton Medical Plan Options Definitions 15. What is an HSA? Health Savings Account, or HSA, is a tax exempt account owned by the employee established to pay or reimburse certain medical expenses. You use the money in your HSA to pay for eligible out-of-pocket health care expenses. You re in charge of when you use this money it could be now or you could let your balance grow and use it later, even in retirement. If you use your HSA for non-eligible expenses, you may be subject to tax penalties. 16. Who owns the HSA? You do. You own the account and the money in it, including the contributions Eaton makes to it. Any unused funds in your account roll over from year to year, so you don t have to worry about using the funds before the end of the year. There is no use it or lose it rule like with the Health Care Reimbursement Account (HCRA). If you retire or leave Eaton, you can take your HSA with you it s yours to keep! Eligibility Who Is Eligible to Contribute to the HSA 17. Who is eligible to contribute to an HSA? To contribute to an HSA, you must meet all of the following eligibility requirements set by the IRS. You can contribute to and save through an HSA if you: Enroll in an eligible High Deductible Health Plan like one of the Eaton Medical Plan options. Do not have any other medical coverage (such as through your spouse s employer or with Medicare), unless it is also an HSA qualified High Deductible Health Plan under the IRS rules. Are not enrolled in a Health Care Flexible Spending Account (FSA). However, you can use the Consumer Dental/Vision Reimbursement Account ( limited purpose FSA) for dental and vision expenses. Note, you are not eligible to contribute to or Page 6

7 receive contributions for an HSA if your spouse has a general purpose Health Care Flexible Spending Account (FSA) from which your expenses can be reimbursed. Are not enrolled in Medicare benefits. Cannot be claimed as a dependent on someone else s tax return. 18. Who monitors if I meet the HSA eligibility requirements? The responsibility is yours to understand the HSA eligibility rules and if you are eligible to contribute to an HSA. In the event of an IRS audit, the IRS will use the HSA eligibility rules to determine if you were eligible to contribute to an HSA. If not, your ineligible HSA contributions will be considered taxable income and have a tax penalty. 19. Can my domestic partner or Child(ren) (tax qualified or non-tax qualified) have an HSA? If your domestic partner or child(ren) is covered by one of the Eaton Medical Plan options under employee + others coverage, he or she may also have his or her own HSA, but outside of the Fidelity HSA. If your domestic partner or child(ren) is not tax qualified, the employee s HSA cannot reimburse the domestic partner s or child(ren) s health care expenses. However, the domestic partner/child(ren) can establish an HSA directly with the bank of his or her choice. Because both the employee and domestic partner/child(ren) are enrolled in employee + others coverage, each can contribute the employee + others maximum to their HSA, which is based on IRS limits ($6,900 in 2018). 20. If I have a spouse or child with other coverage, would I still be eligible to make HSA contributions and receive the Eaton HSA dollars? Yes. As long as you, the employee, are HSA-eligible (see question 21), you can contribute up to the employee + others coverage level maximum, assuming you have coverage other than single-only coverage in the HDHP But remember, the most you and your spouse can contribute on a combined basis is up to that same employee + others coverage level maximum. Your HSA-eligibility is not jeopardized by the type(s) of coverage(s) that your spouse or children may have, whether that other coverage is a High Deductible Health Plan (HDHP) or otherwise. The one exception is if your spouse is enrolled in a flexible spending account that is not limited purpose; that will make you ineligible for the HSA. 21. If my spouse is enrolled in her own employer s flexible spending account (FSA), does it impact my HSA eligibility if I enroll in one of Eaton s Medical plan options? Yes.. Generally, that means you could potentially have any of your eligible expenses reimbursed through your spouse sfsa. As a result, you are not eligible to make HSA contributions if your spouse is enrolled in an FSA that reimburses your medical expenses (unless that FSA is a limited purpose FSA). Note that this rule also applies to a tax-qualified domestic partner. If the tax-qualified domestic partner is enrolled in his or her employer s FSA, your expenses are generally reimbursable by that FSA as well. Therefore, you are not eligible to make HSA contributions. Page 7

8 Who Is Eligible to Have Their Expenses Reimbursed From the HSA 22. Who is eligible to have expenses covered by the HSA? You can use your HSA to cover expenses for you, your spouse and any tax dependent. If your domestic partner meets the IRS qualifications to be considered a tax dependent, you can use your HSA dollars to cover his/her eligible expenses. A non IRS qualified domestic partner or dependent can be covered under the Eaton medical plan but their claims are not eligible medical expenses since they are not a tax dependent. A non IRS qualified domestic partner or dependent that is covered under an Eaton Medical Plan option can open their own HSA outside of Eaton. 23. My spouse works for another employer and has coverage in a non High Deductible Health Plan. If I elect an Eaton Medical Plan Health option, can I use my HSA dollars to pay for my spouse s eligible health care expenses? Yes, you can use your HSA dollars to pay for your spouse s eligible health care expenses. 24. Can I use my HSA to reimburse qualified out-of-pocket expenses for my child who is age 25 (plan definition of an eligible dependent is up to age 26)? HSAs can only be used for tax dependents. Health care expenses for a 25 year old that is not a tax dependent cannot be reimbursed by an HSA. If your child, who is age 25 and not a tax dependent, is covered under one of the Eaton Medical Plan options, your child could set up his or her own HSA and make contributions up to the employee + others limit. 25. I am covering my daughter who is under 26 years of age and who is away at school under the Eaton medical plan. Can I use my HSA funds to cover her qualified medical expenses even though I am not claiming her as a dependent on my tax return? No, HSAs can only be used for tax dependents. Health care expenses for a dependent that is under 26 years old that is not a tax dependent cannot be reimbursed by an HSA. If your child, who is under age 26 and not a tax dependent, is covered under one of the Eaton Medical Plan options, your child could set up his or her own HSA and make contributions up to the employee + others limit. The child s HSA could be used to reimburse these medical expenses. Eligible HSA Expenses 26. What expenses can I use my HSA to pay for? The IRS has created a lengthy list of eligible expenses. You can withdraw money from your HSA to pay for eligible medical, dental and vision expenses incurred by you or your tax-qualified dependents, including: Page 8

9 Deductibles Coinsurance Doctor office visits Emergency care or hospital stays Prescription drugs Eyeglasses and contacts And more For a complete list of eligible expenses, refer to Publication 502 available at If you withdraw money for a non-eligible expense, your withdrawal will be subject to the current tax rate. In addition, if you withdraw funds for a non-eligible expense prior to age 65 years, you will also be subject to a 20% penalty. 27. What are eligible expenses under the HSA? IRS Publication 502 provides an explanation of what qualifies as a medical expense and also provides a list of the more common expenses. These include: Medical, prescription drug, dental and vision expenses Over-the-counter medications (with a prescription only) Medicare premiums, deductibles, coinsurance and copayments Certain Long-Term Care medical expenses and premiums COBRA premiums Smoking cessation programs and weight loss programs to treat a specific disease diagnosed by a physician Note that health insurance plan premiums can only be reimbursed if you are receiving federal or state unemployment benefits For example, you can use HSA funds to pay premiums for coverage in a health plan while you are receiving unemployment compensation. Qualified expenses of a spouse or other federal tax dependent are reimbursable even if such individuals are not eligible to establish their own HSA (e.g., a spouse enrolled in Medicare), and even if such individuals are not covered under the High Deductible Health Plan (HDHP). 28. Can I use my HSA dollars to reimburse myself for an expense that was incurred in the prior year? Eligible medical expenses reimbursed from an HSA must have been incurred on or after the date the HSA was opened. Any expenses before your HSA was opened are ineligible. However, any expenses incurred after the HSA was opened are eligible for reimbursement, even if incurred during a prior tax year. 29. Can I use the HSA to pay for Over-the-Counter (OTC) medications? If you have a doctor's prescription for over-the-counter drugs, you can use your HSA to pay for these items tax-free and penalty-free with your HSA. If you don t have a prescription, over-the-counter drugs are no longer considered eligible medical expenses just like under the HCRA (FSA). 30. What are eligible retiree medical premiums under the HSA? Page 9

10 You can use your HSA dollars in retirement to pay for Medicare premiums (e.g., Medicare Part B) and employer-sponsored premiums, such as premiums for Eaton s Retiree Medical Plan. You cannot use HSA dollars to pay for Medicare Supplement plans. 31. Can I use HSA dollars to pay for COBRA premiums? Yes. 32. Is cosmetic surgery eligible for qualified HSA reimbursement? Generally, unnecessary cosmetic surgery that is used to improve one s appearance and is not used to improve bodily function or to treat a disease or condition is not a qualified medical expense. 33. Is orthodontia eligible for qualified HSA reimbursement? Yes. You can be reimbursed for eligible orthodontic out-of-pocket expenses via the HSA. These expenses are also eligible for reimbursement via the limited-purpose dental/vision HCRA (FSA). 34. I Are my expenses from a Christian Science health practitioner considered a qualified HSA eligible expense? Yes. You may use HSA dollars to reimburse yourself for medical expenses you incur through a Christian Science health practitioner. 35. Are safety glasses I need to buy for work a qualified expense under the Health Savings Account? Amounts paid for eyeglasses and contact lenses needed for medical reasons may be reimbursed via the HSA. Safety glasses that are not prescription glasses are not an eligible medical expense under the HSA. However, if you are required to provide your own safety glasses (non-prescription) as a condition of employment, you may be eligible to claim these safety glasses as a deduction for this expense on your income tax return. 36. Can I use my HSA outside the United States? Yes, as long as the expenses otherwise meet the definition of qualified medical expenses" under IRC Sec. 223(d)(2) and "medical care" IRC Sec. 213(d). The fact that the unreimbursed medical expenses are incurred outside the US does not matter in determining whether the expenses may be reimbursed by an HSA. Page 10

11 Change in Status and the HSA 37. If I get married during the year, can my spouse join the plan and open an HSA? If you experience a qualified status change, like getting married or having a baby, your spouse is eligible to join the Eaton medical plan as your covered dependent. However, you must add your spouse to coverage by contacting the Eaton Service Center at Fidelity with the time period specified in the medical summary plan description (SPD). If you are enrolled in the one of the Eaton Medical Plan options at the time you enroll your spouse in the Eaton medical plan, you can increase your contributions up to the employee + others HSA maximum or your spouse can open his/her own HSA, but only Eaton employees can establish a Fidelity HSA through Eaton. Your spouse is eligible to establish his or her own HSA outside of Eaton. However, the total amount that may be contributed to both of your HSAs is limited to the maximum for employee + others coverage based on IRS limits. 38. I am planning on getting married in July and adding my husband to Eaton s medical coverage. What does my change in coverage level mean to my HSA contribution? Let s assume your coverage level on January 1 through June 30 was employee-only coverage under one of the Eaton Medical Plan options. Then, you get married in July and add your spouse to your plan (under employee + others coverage) for the months of July through December. Because your coverage level on December 1 is employee + others, your annual IRS contribution limit for that year will be the employee + others maximum. Please note that your ability to contribute up to this full amount is impacted by the last-month rule discussed in more detail in the Contributions section of these FAQs. Since your coverage level on January 1 was employee-only, you will receive the $400 Eaton HSA contribution in early January. When you change coverage to employee + others on July 1, you will receive an additional company contribution of $200. Eaton will prorate the company contribution based on your coverage levels (employee-only or employee + others). In this example you had employee-only coverage for six months and employee + others coverage for six months for a full year company contribution of $600. Note that if you add a spouse after the 1 st of the month, the Eaton contribution to your HSA is prorated based on the next full month in which you have employee+others coverage. 39. If I experience a mid-year status change due to a divorce and go from employee + others coverage to employee-only coverage, can I keep the full employee + others Eaton HSA contribution? Yes. If you were in one of the Eaton Medical Plan options on January 1, you would receive the $800 Eaton HSA contribution in early January. Once you have received the Eaton contribution, it is yours to keep. It will not be reduced even if your coverage status changes. Page 11

12 HSA Contributions General HSA Contribution Questions 40. If I enroll in one of the Eaton Medical Plan options, is there a deadline to open the HSA? In addition to electing a High Deductible Health Plan (HDHP) you also have to open the HSA account at Fidelity before the Eaton contribution or your contributions can go into your account. To avoid any delays, open your HSA as soon as you enroll. Eaton makes this process easy for you. When you enroll online and elect one of the Eaton Medical Plan options, you will be able to open your HSA at the same time. Contributions to an HSA are not allowed until the HSA is opened. Also, medical expenses incurred before your HSA is opened are not considered eligible medical expenses. 41. What are the annual limits for my HSA contributions? What happens if I contribute more than the maximum? The 2018 annual IRS contribution limits are: $3,450 for employee-only coverage $6,900 for employee + others coverage. $1,000 catch-up contributions for employees age 55 or older Employee + others coverage applies to: Employee + spouse/domestic partner, Employee + child(ren), or Employee + spouse/domestic partner and child(ren). If you contribute more than the IRS limits, you will need to withdraw the additional funds by April 15 th of the following year to avoid a 6% tax penalty. Contact The Eaton Service Center at Fidelity for details on how to withdraw excess HSA funds. 42. What happens to my HSA contributions at year-end if I have not had any health care expenses? Any remaining HSA balance at year-end will roll over to the following year. You can use these HSA dollars to pay for health care expenses next year or in future years, including retirement. 43. Is there a time limit for my annual contributions? Yes. Your contributions to your HSA for a particular calendar year can be made between January 1 of that year and April 15 of the following year. This gives you the flexibility of not having to make your entire HSA contribution by year-end. The IRS gives you an extra 3½ months to contribute to your HSA within the current year IRS contribution limits. Please note, you will need to send contributions directly to Fidelity if you want them to apply to the prior year. Eaton payroll deductions will always apply to the current year. If you become eligible for an HSA sometime during the year, rather than on January 1, you can still contribute and deduct the full amount of the annual limit above if you are Page 12

13 eligible on December 1 of that year (this rule applies even if your first day of eligibility was December 1). However, if you fail to maintain your eligibility for a testing period then the amount you contributed under this rule, that is in excess of a prorated limit, is subject to taxation and a 10% penalty (except in the case of disability or death). The testing period is the period beginning in the last month of the taxable year (generally December 1) and ending on the last day of the 12th month following such month (generally December 31 of the next year). Otherwise, please see IRS Form 8889 for details on the months one is eligible to contribute. See question 60 to understand the rules if you don t meet the testing period criteria. Eaton HSA Contributions 44. Will Eaton be making contributions into my HSA? Yes. To help you offset the cost of your annual deductible, Eaton will make a lump sum contribution to your account in early January of: $400 for employee-only coverage, or $800 for employee + others coverage. Note that employee + others coverage is defined as employee + spouse/domestic partner or employee + child(ren), or employee + spouse/domestic partner + child(ren). The Eaton contribution is only made once your HSA is opened at Fidelity. Your account must be opened before that year s deadline which is usually shortly before the end of November. The contribution is made as soon as administratively possible (in early January if you enroll during open enrollment). 45. Will the Eaton HSA contribution ($400 for employee-only / $800 for employee + others) be available in the future? The availability of the Eaton contribution is reviewed by Eaton senior management on an annual basis. 46. Do I have to contribute my own money in order to get the Eaton HSA contribution? No. If you enroll in one of the Eaton Medical Plan options, Eaton will automatically deposit the Eaton free money into your account based on your coverage level ($400 employee-only coverage and $800 employee + others coverage). You do need to make sure that your HSA has been opened before the Eaton free money can be deposited into your account. Your account must be opened before that year s deadline which is usually shortly before the end of November. Page 13

14 Your HSA Contributions 47. Who can make pre-tax payroll contributions to an HSA and when are they deposited? Individuals who are enrolled in an Eaton Medical Plan option and who have opened an HSA can make pre-tax payroll contributions to their HSA,assuming you are otherwise eligible to make HSA contributions,. During the enrollment process, you will elect the amount of pre-tax payroll contributions you want deposited into your HSA each pay period. Your payroll deductions will be effective for the first payroll of the year if you made your elections during the enrollment period and you opened your HSA account. You can change your contribution amount at any time by contacting the Eaton Service Center at Fidelity by phone. Your contribution change may also take one to two pay periods to take effect. 48. Can I change my elected HSA contribution amount during the year? Yes. You can change the amount of your HSA contribution at any time during the year by contacting the Eaton Service Center Fidelity and talking to a phone representative. Keep in mind it might take a few pay periods for your HSA contribution change to take effect. HSA contributions are divided equally by the remaining pay periods in the calendar year if restarted or modified. 49. Can I make other contributions besides pre-tax contributions through Eaton? Yes. This is called an after-tax contribution. You can make this after-tax contribution directly with Fidelity at any time. When you file your tax return, you can claim this contribution as a deduction, however, unlike a payroll contribution, you will not receive credit for Medicare or Social Security taxes. 50. Can I make a lump sum contribution to my HSA through a payroll deduction? No. You can only make a lump sum contribution directly to Fidelity by writing a personal check and having it deposited into your HSA. 51. Why would I want to contribute to my HSA via a lump sum contribution? In most cases, making pre-tax payroll contributions to your HSA is the most convenient process for contributing to the HSA. In addition, using pre-tax payroll contributions ensures you get the greatest tax advantages. In certain circumstances, a lump sum contribution to your HSA may make sense for you. For example: You have a large medical expense early in the year that you would like to pay for immediately via tax-advantaged HSA dollars. The lump sum option avoids you having to wait until your pre-tax payroll contributions are deposited into your account each pay day. You want to take advantage of the HSA tax benefits by contributing up to the current year IRS limits but don t have the available funds until early the next year, you can make a lump sum contribution directly to Fidelity by the IRS tax filing date (generally April 15 th of the next year). Page 14

15 You may be absent from work on an unpaid leave of absence and will not have payroll deductions taken for the period of time. Those missed deductions will not be taken from your pay when you return to work. As a result, you may opt to make up those deductions by contributing that amount through a lump sum contribution. (Alternatively, you may be able to increase your future contributions to make up the difference.) Note that with a lump sum HSA contribution you don t receive all of the pre-tax payroll contribution benefits. With a pre-tax payroll HSA contribution, you do not pay Social Security and Medicare taxes. After-tax contributions to an HSA account (not payroll deductions) can be used to decrease gross taxable income on your year-end federal tax return. Over Age 55 or Secondary Coverage Impact on Contributions 52. My spouse is covered under her employer s non High Deductible Health Plan (HDHP) as a secondary plan. I also cover her under one of the Eaton Medical Plan options. How does that impact our ability to contribute to the HSA? Both you and your spouse are eligible to participate in one of the Eaton Medical Plan options. The difference is whether you and your spouse are eligible to contribute to the HSA. In this situation, as long as you are HSA-eligible, you may contribute up to the employee + others HSA limit. Your spouse, because she is enrolled in a non-hdhp, is not eligible to make her own contributions to an HSA. 53. My spouse and I are both over age 55, can we both make $1,000 catch-up contributions to the HSA? Yes, if you are both HSA-eligible, you can each make your own $1,000 catch-up contribution. However, your respective catch-up contributions must go to your own separate HSAs. You, the employee, cannot make a $2,000 catch up contribution to your HSA on behalf of you and your spouse. Instead, you can make a $1,000 catch-up contribution to your HSA and your spouse can make her own $1,000 catch-up contribution to her own HSA. 54. My spouse and I are both Eaton employees. I take employee-only coverage for myself and my spouse takes employee + child(ren) coverage. Do I get $400 deposited by Eaton into my HSA and does my spouse get $800 deposited by Eaton into their HSA? What about the IRS annual limits? Can I contribute up to employee only limit in my own HSA and my spouse contribute up to the employee + others limit in his/her own HSAs? The maximum combined amount that a husband and wife may contribute to each HSA if either spouse has employee + others High Deductible Health Plan (HDHP) coverage is the employee + others maximum. In addition, each HSA-eligible spouse who will be age 55 at the end of the calendar year (and not enrolled in Medicare) may contribute an additional $1,000 catch-up contribution to his/her own HSA, for a maximum combined Page 15

16 contribution equal to the employee + others maximum plus $2,000. Refer to IRS Publication 969, page 6 ("Rules for married people") for details. Eaton will contribute $400 to the employee with employee-only coverage and $800 to the employee with employee + others coverage. However, you should run the numbers to confirm that the additional $400 is worth the additional deductible, out-of-pocket maximum and medical plan contributions. Change in Coverage Impact on Contributions 55. If I switch from an Eaton Medical Plan option to my spouse s plan next year, can I still keep my HSA? Yes. Your HSA is yours to keep. You can still use any remaining HSA dollars to pay for eligible health care expenses. Note that if your spouse s plan is not a High Deductible Health Plan (HDHP), you will not be able to contribute dollars to the HSA, but the dollars in your HSA account can be used for qualified medical expenses in any future period, regardless of the type of health care coverage you have then. Rollovers and Excess Contributions 56. Can an eligible HSA account holder make a qualified HSA funding distribution from an IRA or Roth IRA? Yes. An HSA-eligible individual is permitted to make a one-time, tax-free direct trusteeto-trustee transfer from an individual s Roth or traditional IRA to an HSA (i.e., a qualified HSA funding distribution ), subject to the annual HSA contribution limits, if certain conditions are satisfied. A qualified HSA funding distribution reduces, dollar for dollar, the amount that an HSAeligible individual may otherwise contribute to an HSA during the year. Only one qualified HSA funding distribution is allowed during an individual s lifetime (not one per IRA). In order for the qualified HSA funding distribution to remain tax-free and avoid an additional 10% tax, the individual must remain HSA eligible for the entire 12-month period following the month in which the distribution was made (i.e., the testing period ), except that an individual s failure to remain HSA eligible due to death or disability will be disregarded. See IRS Notice for further details on qualified HSA funding distributions. Also, see IRS Publication 969, Qualified HSA funding distribution". 57. I have an HSA from a previous employer can I roll it into the Eaton HSA? Yes. If you have an HSA from a previous employer, you can roll that balance into the Eaton HSA. Contact Fidelity directly to request the paperwork to roll over this HSA balance. 58. What are the rules governing excess contributions? If your annual contribution exceeds the IRS limit for a particular calendar year, you must withdraw the excess amount by April 15 of the following year (IRS filing deadline for the Page 16

17 prior tax year). Excess contributions are subject to tax and amounts that are not withdrawn by the April 15 th are subject to an additional 6% tax penalty. Implications of Not Being Eligible to Make HSA Contributions for the Entire Year In certain circumstances, an employee may not be eligible to make HSA contributions for the entire year. For example, if an employee: Is hired after January 1 Leaves Eaton during the year Retires during the year Loses HSA eligibility at some point during the year (see the HSA Eligibility section for details) If you are not eligible to make HSA contributions for the entire year, there are certain implications you need to be aware of regarding your HSA contribution. The FAQs below highlight some of these key considerations. 59. How does the IRS define coverage levels under a High Deductible Health Plan (HDHP), like one of Eaton s Medical Plan options? If you refer to IRS Publications to help you understand how a HDHP with an HSA works, it is important to understand the terminology that the IRS uses and how it compares to Eaton s terminology. The chart below provides the key IRS and Eaton terminology comparisons you need to be aware of regarding coverage levels: Eaton Coverage Level IRS Terminology 2018 Annual IRS Maximum Employee only Single $3,450 Employee + Others which includes the following: Family $6,900 Employee + Spouse / Domestic Partner Employee + Child(ren) Employee + Spouse / Domestic Partner + Child(ren) 60. Are all employees who elect one of the Eaton Medical Plan options for a particular calendar year but leave the company before December 31 of that year subject to the same limits and testing period? Yes. All individuals are subject to the limits and testing period regardless of the employment status. In other words, if you fail to remain an eligible individual during the testing period, your maximum annual contribution will be determined by prorating the coverage level for the number of months you maintained coverage in the high deductible Page 17

18 health plan. Contributions you may have made in excess of the prorated annual maximum are considered excess contributions and are required to be withdrawn subject to income tax and potentially an additional penalty if not withdrawn in accordance with the IRS provisions. 61. What is the maximum HSA contribution I can make if I am not eligible to make an HSA contribution for the entire year (e.g., hired after January 1, terminate employment, retire, or lose HSA eligibility during the year)? Your annual contribution limit is the greater of: The sum of the annual maximum contribution each full eligible month divided by 12. (See the instructions on IRS Publication 969 for details.) OR The maximum annual contribution based on your High Deductible Health Plan (HDHP) coverage (Employee-only or Employee + others) on December 1 (Lastmonth rule). Please note, special testing period requirements could make a portion of your HSA contributions taxable plus add an additional 10% tax penalty. Example This example shows the HSA contribution limit for Employee-only coverage and Employee + others coverage assuming an individual is hired on March 15, 2018 and chose one of the Eaton Medical Plan options. Employee-only Employee + others January $0 $0 February $0 $0 March $0 $0 April $3,450 $6,900 May $3,450 $6,900 June $3,450 $6,900 July $3,450 $6,900 August $3,450 $6,900 September $3,450 $6,900 October $3,450 $6,900 November $3,450 $6,900 December $3,450 $6,900 Total $31,050 $62,100 Limitation (divide by 12) $2, $5,175 Based on the chart above your annual contribution maximum for 2018 would be the greater of: Employee-only $2, (from the chart above), or $3,450 (your annual maximum on December 1, 2018, using the Last-month Rule) Employee + others $5, (from the chart above), or $6,900 (your annual maximum on December 1, 2018, using the Page 18

19 Last-month Rule) Note that any catch-up contributions for those age 55 or older, are treated the same way as regular HSA contributions. As a result, if you are only eligible for part of the year, your $1,000 catch-up contribution will also be pro-rated like in the example above (unless the Last-month Rule is applied). 62. Are there any special requirements if I determine the HSA annual maximum contribution using the Last-month Rule? Yes, to be eligible for the full annual maximum contribution using the Last-month Rule, you must remain an eligible individual during the testing period which begins on the last month of your tax year (December) and ends on the last day of the 12 th month following that month (next December 31) of the next plan year. Investing Your HSA Dollars 63. Can I invest my HSA dollars? What are my investment options? Fidelity has over 4,600 investment options from which to choose to invest your HSA dollars. Most of the investment options have a minimum HSA balance requirement in order to investment your HSA dollars. You will receive details from Fidelity regarding your HSA investment options. Your money will remain in an interest bearing Core account until you direct Fidelity to make an investment. 64. Where will my HSA dollars be invested? All contributions into the HSA go into an FDIC-insured cash account (core account) until you direct Fidelity to make an investment. You can invest out of the cash account into mutual funds (including money market funds), stocks, bonds, CDs, and ETFs. 65. Is there a minimum amount to deposit in an HSA? Most mutual funds have a $2,500 initial investment minimum (note this can vary by fund), whereas the other investment options may not have minimums. You are not required to keep a minimum amount in your core position (cash) account. Note that all distributions are made from your core position account, so you will need to be sure you have funds in the core position if you want to take a distribution. 66. Is there an investment option for the HSA that is very low risk, similar to a checking account? Certain options in the (HSA) brokerage account are more conservative than others and are more likely to hold their value. Cash and CDs are stable and FDIC-insured up to certain limits.. Talk to your financial advisor to establish the HSA investment strategy that makes sense for your short- and long-term goals. Page 19

20 67. How can I maximize the HSA to pay for retiree medical expenses? The HSA can be used as a savings vehicle for your health care expenses in retirement. Here are some tips to maximize your savings potential: Allow your contributions and Eaton s contributions to accumulate in your HSA by paying for eligible health care expenses out of your own pocket. Be sure to save your receipts. You can withdraw the expense from your HSA at a later date there is no time limit on withdrawals from the HSA other than they are required to be incurred after you establish your HSA. Take full advantage of tax savings by contributing the maximum amount. Invest your HSA. Contact Fidelity regarding your HSA investment options and potential investment return on these dollars. Using my HSA (Withdrawals) You have several options to take a distribution from your HSA to pay for qualified medical expenses: Fidelity HSA debit card automatically sent to you after your HSA account is opened Fidelity HSA checkbook you can request an HSA checkbook at Fidelity.com Fidelity BillPay you can direct an electronic payment to health care providers or to yourself Fidelity Phone Representative contact the Eaton Service Center at Fidelity and request a distribution check be mailed to you Please keep in mind that all disbursements come from your Core Account. Your contributions and Eaton s contribution go into your Core Account. You have the ability to invest these contributions by directing Fidelity to move funds from your Core Account to optional investments. NOTE: Your debit card, and Billpayer will not be accepted if you do not have adequate funds in your Core Account to cover the disbursement. If you have moved funds out of your Core Account into other investments, you may need to transfer funds back to the Core Account to cover the amount of distribution. Employees are responsible for NSF (non-sufficient funds) fees for checks written against the HSA account without adequate funds. Please keep in mind that it takes three settlement days to liquidate investments and have funds available in your Core Account. 68. How do I reimburse myself for health care expenses from the HSA? Use your HSA debit card or an HSA checkbook to pay your doctor (or pharmacy) directly for eligible health care expenses. You can also reimburse yourself for eligible health care expenses that you ve paid out of your pocket by: Writing yourself an HSA check, or Requesting an electronic funds transfer to your personal bank account, or Requesting a check be mailed directly to you from your account. Page 20

21 69. What can I do to help ensure the accuracy of my HSA payments? There are two things you can do to ensure the accuracy of your HSA payments: Use your HSA for eligible health care expenses. It is up to you to ensure your HSA is used to pay for eligible health care expenses. As a reminder, if you use your HSA to pay for anything that is not an eligible health care expense, you will pay a tax penalty on that amount. Keep your receipts for your files in the event you need to provide the IRS proof that your HSA dollars were used for eligible health care expenses. Compare your Explanation of Benefits (EOB) to your HSA debit card receipt to ensure your charges reflect the Anthem BCBS negotiated rate. That way you can ensure you saved money by receiving a discount on the cost of health care services for using network providers. 70. What documentation is needed to receive reimbursement from my HSA? You can use your HSA debit card or HSA checkbook to pay for eligible expenses at the time of service. You do not need to provide receipts to withdraw money from your HSA (unlike the HCRA). However, you should keep all of your receipts for your tax records. In the event you are audited by the IRS, you may need to provide proof that your HSA funds were used for eligible health care expenses. Also ensure you are always only using your HSA card for qualified expenses, as it is not simple to return money to your account once it has been withdrawn for nonqualified expenses. As a result, you may have to pay taxes and other penalties. Medicare Benefits and the HSA 71. I am enrolled in Medicare. Can I participate in an HSA? As noted in the HSA Eligibility section, an individual who is covered by a health plan that is not a High Deductible Health Plan (HDHP), including Medicare, is not eligible to make contributions to an HSA or to receive the Eaton HSA contribution. Note that you do not automatically become enrolled in Medicare Part A unless you receive Social Security benefits. Therefore, you can control your Medicare enrollment to protect your eligibility to make and receive HSA contributions. 72. I want to enroll myself and my child in one of the Eaton Medical Plan options. However, my child is enrolled in Medicare. Can I elect Employee + Child(ren) coverage in one of the Eaton Medical Plan options and still be able to contribute to an HSA? Yes, assuming you do not have access to any other plan coverage (i.e., you meet the HSA eligibility rules). You may elect Employee + Child(ren) coverage in one of the Eaton Medical Plan options and contribute to an HSA up to the IRS employee + others limit. You will also receive the $800 Employee + others Eaton HSA contribution in early January. Page 21